UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 39151 / September 30, 1997
ADMINISTRATIVE PROCEEDING
File No. 3-9454
In the Matter of : ORDER INSTITUTING PUBLIC
: PROCEEDINGS, MAKING
MICHAEL L. COOPERSTOCK, : FINDINGS AND IMPOSING
: REMEDIAL SANCTIONS
Respondent. :
I.
The Securities and Exchange Commission (Commission) deems it appropriate
and in the public interest that public proceedings be instituted pursuant
to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934
(Exchange Act) against Michael L. Cooperstock (Cooperstock). In
anticipation of these proceedings, Cooperstock has submitted an Offer of
Settlement which the Commission has determined to accept. Solely for the
purpose of this proceeding and any other proceeding brought by or on behalf
of the Commission, or to which the Commission is a party, Cooperstock, by
his Offer of Settlement, without admitting or denying the Commission's
findings, except the Commission's jurisdiction and the findings contained
in Paragraphs III.A. and III.L., which are admitted, consents to the entry
of this Order.
II.
Accordingly, IT IS HEREBY ORDERED THAT proceedings pursuant to Sections
15(b) and 19(h) of the Exchange Act be, and they hereby are, instituted.
III.
On the basis of this Order and the Offer of Settlement submitted by
Cooperstock, the Commission finds that:
A.Cooperstock, age 44, is a resident of Whitmore Lake, Michigan. From
November 1993 until December 1995, Cooperstock was employed as a registered
The findings herein are made pursuant to Respondent's
Offer of Settlement and are not binding on any other person or
entity in this or any other proceeding.
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representative for a registered broker-dealer in Dearborn, Michigan. From
1986 through 1993, he was a registered representative at a registered
broker-dealer in Ann Arbor, Michigan. At no time was Cooperstock
personally registered as a broker-dealer.
B. From 1990 to October 1995, Lease Equities Fund, Inc. (LEF) leased
equipment for use by businesses and financed these transactions by issuing
securities in the form of promissory notes ("Notes or "LEF Notes") secured
by the equipment leases. Each Note was secured by a percentage of a lease
equal to the present value of the principal due on the Note. No
registration statement has been filed with the Commission or been in effect
for the LEF Notes.
C.Beginning in 1990 and continuing through October 1995, an officer of LEF
(Officer) began operating a "Ponzi" scheme in which he used part of the
proceeds from the sale of new LEF Notes to make principal payments to LEF's
earlier investors. In or about August 1994, LEF, through the Officer,
began offering and selling Notes secured by: (1) leases that were
previously assigned in full to other investors; (2) leases that were forged
or altered; (3) otherwise genuine leases to which LEF was not a party and
in which LEF had no interest; and (4) unconsummated agreements between NBF
Cable Systems, Inc. (NBF), a cable television company affiliated with LEF,
and potential customers of NBF. In addition, the Officer often failed to
perfect the security interests of the investors in the leases. The Officer
was also using funds raised from Notes to finance the operations of NBF.
As a result of this Ponzi scheme, LEF owed at least $14.2 million on at
least 265 Notes issued to at least 95 investors when it ceased doing
business in September 1995 and had few, if any assets with which to repay
investors.
D.From 1992 and continuing through October 1995, Cooperstock offered and
sold at least 76 LEF Notes, totaling at least $2.6 million, to investors.
LEF has failed to repay approximately $1.9 million of principal due from
these Notes. During this period, Cooperstock was paid at least $70,000 in
commissions by LEF. Cooperstock sold these Notes primarily to his
customers at the broker-dealers where he was employed. However, when
Cooperstock sold the Notes, he acted independently from his association
with either broker-dealer. Cooperstock conducted no due diligence to
determine the risk and suitability of the LEF Notes other than to request
that the Officer provide him with LEF's financial statements, which he
never received.
E.While soliciting his customers to purchase LEF Notes, Cooperstock made
numerous misrepresentations of material facts. Cooperstock told investors
that the funds raised by the Notes were to be used to finance equipment
lease transactions when, in fact, the funds were used to pay previous
noteholders and to finance the operations of Cable. He also told investors
that the Notes were adequately secured by a lease or NBF contract when, in
fact, the leases were also assigned to other Notes, were forged or altered,
were not owned by or assigned to LEF or, in the case of NBF contracts, were
never consummated. Cooperstock also gave each investor a financing
statement to sign and return to LEF. The financing statement was supposed
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to be filed with the Michigan Secretary of State by the LEF officer to
record the investor's security interest in the lease. However, Cooperstock
failed to tell investors that, in fact, the LEF Officer did not always make
such filings. In addition, Cooperstock represented to at least one
investor that he had seen LEF's financial statements when, in fact, he had
not. Finally, Cooperstock represented to his customers that he was selling
the Notes with the knowledge and approval of the broker-dealer that
employed him when, in fact, he was acting independently from his
association with the broker-dealer.
F.Cooperstock's conduct also included his solicitation of four of his
customers to purchase $300,000 in LEF Notes to be issued in Cooperstock's
name, in order to retire other Notes held by Cooperstock. Cooperstock told
these customers that they were investing in LEF when, in fact, he used
their investments to redeem his Notes. None of the principal on these
subsequent Notes has been repaid.
G.From 1992 through October 1995, Cooperstock willfully violated Sections
5(a) and 5(c) of the Securities Act of 1933 (Securities Act) in that he,
directly or indirectly, made use of the means or instruments of
transportation or communication in interstate commerce or of the mails to
sell or offer to sell, through the use or medium of a prospectus or
otherwise, securities described in Paragraphs III.B. and III.C. above, or
carried or caused them to be carried through the mails or in interstate
commerce by the means or instruments of transportation for the purpose of
sale and delivery after sale, while no registration statement was in effect
or filed with the Commission, as described in Paragraph III.D. above.
H.From 1992 through October 1995, Cooperstock willfully violated Section
17(a) of the Securities Act in that he, by the use of the means or
instruments of transportation or communication in interstate commerce or by
the use of the mails, directly or indirectly, in the offer or sale of
securities described in Paragraphs III.B. and III.C. above, employed
devices, schemes or artifices to defraud; obtained money or property by
means of untrue statements of material fact or omissions to state material
facts necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading; or engaged in
transactions, practices or courses of business which operated or would
operate as a fraud or deceit upon purchasers or prospective purchasers of
such securities. As a part of this conduct, he made misrepresentations or
omissions of material facts to investors, all as described above in
Paragraphs III.C. through III.F. above.
I.From 1992 through October 1995, Cooperstock willfully violated Section
10(b) of the Exchange Act and Rule 10b-5 thereunder in that he, in
connection with the purchase or sale of securities described in Paragraphs
III.B. and III.C. above, directly or indirectly, by the use of the means or
instrumentalities of interstate commerce, or of the mails, employed
devices, schemes or artifices to defraud; made untrue statements of
material fact or omitted to state material facts necessary in order to make
the statements made, in the light of the circumstances under which they
were made, not misleading; or engaged in acts, practices, or courses of
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business which operated or would operate as a fraud or deceit upon the
purchasers of the securities, as described in Paragraphs III.C through
III.F. above.
J.From 1992 through October 1995, Cooperstock willfully violated Section
15(a)(1) of the Exchange Act in that he made use of the mails or the means
or instrumentalities of interstate commerce to effect transactions in, or
to induce or attempt to induce the purchase or sale of the securities
described in Paragraphs III.B. and III.C. above, without being registered
as, or associated with, a broker or dealer registered with the Commission
pursuant to Section 15(b) of the Exchange Act, as described in Paragraph
III.D above.
K.From 1992 through October 1995, Cooperstock willfully violated Section
15(c)(1) of the Exchange Act and Rule 15c1-2 thereunder in that he, while
acting as a broker-dealer, by the use of the mails or of the means or
instrumentalities of interstate commerce, effected transactions in, or
induced or attempted to induce the purchase or sale of the securities
described in Paragraphs III.B. and III.C. above, by means of manipulative,
deceptive or other fraudulent devices or contrivances, including acts,
practices or courses of business which operated or would operate as a fraud
or deceit or made untrue statements of material fact or omitted to state
material facts necessary in order to make the statements made, in the light
of the circumstances under which they were made, not misleading, which
statements or omissions were made with knowledge or reasonable grounds to
believe they were untrue or misleading, as described in Paragraphs III.C.
through III.F. above.
L.On September 26, 1997, the United States District Court for the Eastern
District of Michigan, in the case of Securities and Exchange Commission v.
William H. Malek, Dean C. Turner and Michael L. Cooperstock (Civil Action
No. 97-74810), entered a Final Judgment and Order of Permanent Injunction
by consent against Cooperstock, which enjoins him from future violations of
Sections 5(a), 5(c) and 17(a) of the Securities Act, and Sections 10(b) and
15(a)(1) and 15(c)(1) of the Exchange Act and Rules 10b-5 and 15c1-2
thereunder.
IV.
In view of the foregoing, it is in the public interest to impose the
sanctions specified in the Offer of Settlement, such sanctions to begin
from the date of the entry of the Commission's order.
Accordingly, IT IS ORDERED THAT Michael L. Cooperstock be and hereby is,
barred from association with any broker, dealer, municipal securities
dealer, investment adviser or investment company, with the right to reapply
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for association after five (5) years to the appropriate self-regulatory
organization, or if there is none, to the Commission.
By the Commission.
Jonathan G. Katz
Secretary
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